Nigerian Treasury Bills Yield Falls Below 3%
New Naira Notes

Nigerian Treasury Bills Yield Falls Below 3%

In the secondary market for trading Nigerian Treasury bills, the yield curve has continued to pull back following a relatively healthy buying interest by the market participant ahead of the Central Bank of Nigeria (CBN) primary market auction (PMA).

The average yield on Nigerian Treasury bills dropped below 3% on Tuesday despite money rate repricing, from about 11% in 2022. At the same time, the spot rate on the Central Bank auctions has declined following demand pressures on government instruments.  

Speaking about the auction schedule for Wednesday where the apex is expected to roll over maturing bills, analysts said the spot rate will likely drop further in consonance with the current market trend.

Since late last year, spot rates across Treasury bills tenored have been on the decline on account of increased demand for short-term instruments in the fixed income market. This widened the real return on bills as inflation is expected to rise further.

Nigerian banks have remained relatively bullish in the segment to even out pressures from cash reserve ratio debit by the apex bank.

Data from the market indicate that bullish sentiments persisted on Tuesday in the secondary market for Nigerian Treasury bills as the average yield declined by 11 basis points to 2.9%.

Across the curve, Cordros Capital told clients via email that the average yield dipped at the short (-19bps) and mid (-12bps) segments due to bargain hunting on the 79-day to maturity (-78bps) and 107-day to maturity (-48bps) bills, respectively.

Meanwhile, the average yield was flat at the long end. However, the average yield was flat at 3.4% in the open market operations (OMO bills) segment. This occurred as the Central Bank failed to refinance matured OMO bills worth N10 billion.

The inflow from the maturity lifted the financial system liquidity higher, and short-term rates fall in the absence of funding pressures in the market.

Market data from the FMDQ Exchange platform showed that open buy back slow down further to 9.5% from 10.17% and the overnight lending rate fell to 9.83% from 10.83%, respectively – a similar pattern was seen in the previous day.

Coronation research expects rates in the money market to remain elevated as the projected outflow from an NTB, OMO, and FX auctions, as well as a potential CRR debit by the CBN would likely outweigh potential inflows from Nigerian Treasury bills maturity.

Analysts told MarketForces Africa that yield will bounce back as the government launches a fresh borrowing plan in the local capital market to finance budget deficits for the fiscal year 2023. #Nigerian Treasury Bills Yield Falls Below 3%

>>>>Naira Steadies as FX Transactions Fall by 21%